Editor's note: You can't become a better investor if you don't hone your strategy...
And part of that process includes finding the best data available. That makes the difference between a "good" and "great" investment.
According to Marc Chaikin – founder of our corporate affiliate Chaikin Analytics – better data is the key that can put you ahead of the crowd and help prevent you from entering unsafe investments.
In today's Masters Series, updated from the May 19 and 20, 2021 issues of our free DailyWealth e-letter, Marc explains how the advice he received on Wall Street changed his investing approach... and inspired his Power Gauge, which continues to warn investors of risky stocks...
Using the Best Data Can Give You an Edge Like Nothing Else
"You're not really going to only rely on the firm's research, are you?"
It was 1966. I had just landed a position as a broker. And at the time, I really did think my own firm's research would be plenty for me and my clients.
A member of the "old guard" had pulled me aside to tell me different. "Listen, you'll have to learn this on your own. But there's someone I think you should know about..."
It might sound like a random piece of advice. But it was actually a life-changing introduction... one that completely transformed my approach to helping investors.
Let me explain...
It started when my colleague introduced me to George Chestnutt's financial writing. I'm guessing you haven't heard of Chestnutt. But his work was pioneering at the time.
He used math to find the strongest industry groups... and the strongest stocks in those groups.
That made Chestnutt an outsider for sure. Back then, nearly everyone was looking at a smattering of fundamentals. Then, they'd assemble an interesting story around those few bullet points, and that was it.
The best storytellers turned out to be talented brokers. That is, they were talented at getting their clients to buy.
It was great for them... not so great for their clients.
The day of that conversation, I realized my mentor was right. I needed more than just stories.
My clients deserved better. Not only that, but to really be able to sell, I knew I'd need to have data to back up my claims.
So I did the most reasonable thing... I signed up for Chestnutt's newsletter service.
Chestnutt's work was my way of accessing the best data available at the time. And I knew that I wanted the best data available on my side.
Here's the thing, though. To get the best data, you have to go the extra mile...
Chestnutt was a bit "out there" compared with most analysts at the time. The guy spent his time meticulously tracking the major industries trading on Wall Street. He did a lot of it by hand. And he did the rest with early calculators.
Those of us who were around back then know what a monumental task this was. You'd have to be a little crazy to even pursue it.
I didn't realize where I was headed back in the '60s... not at first. But once I looked outside my own firm, I started to follow Chestnutt's path. My life's work became collecting data, parsing it, and using it to make evidence-based investing decisions.
I've been very fortunate and successful at it.
Bloomberg built my systems into its world-famous trading terminals. And its main competitor – Thomson Reuters – did, too.
I made finding the best data my life's goal... and just as important, performing the best analysis on it.
I've found it deeply rewarding. And I'm passionate about sharing it. That's because the best data gives you an edge as an investor that nothing else can.
I saw firsthand exactly how important this was after the financial crisis in 2008...
I saw the little guy get creamed by Wall Street. So my focus shifted yet again. I developed a set of tools for individual investors. They're specifically designed to turn trading and investing into a fair fight for those who aren't Wall Street elites.
Together, this set of tools is called the "Power Gauge." And I've poured everything I've learned over my more than 50 years in finance into it.
Giving Jon Najarian a Great Call
"Based on the bearish Power Gauge rating, I think the risk of a negative earnings surprise is too great."
I said those words in 2012, as I was appearing for the first time on CNBC's Fast Money Halftime Report.
On the panel next to me was Jon Najarian. I'm guessing you've heard of him...
The NFL-linebacker-turned-high-profile-trader had become a household name in the financial world by then. He would go on to sell his publishing and trading platforms, optionMONSTER and tradeMONSTER, to E-Trade just a few years later for $750 million.
Jon was at the peak of his financial career. And although I'd been making the rounds on CNBC, this was the first time we had crossed paths.
The stock we were talking about was online travel agency Priceline, which later changed its name to Booking Holdings (BKNG).
Priceline was one of Jon's bullish trades at the time. And I had just told CNBC viewers that it looked too risky.
The thing is, I didn't know anything about Priceline.
But I did have the Power Gauge to guide me. And that was all I needed...
As longtime readers know, the Power Gauge is the culmination of my life's work.
It combines more than five decades' worth of data-driven market research. And it packages everything I've learned about the markets into actionable information for every stock it processes.
So I didn't need to know much about Priceline. I just typed in the ticker and got my report.
Immediately, I saw that Priceline was set up to release disappointing earnings. The Power Gauge made it clear.
Obviously, the interface for the Power Gauge has gotten more refined over the years. Here's an example of another stock that the Power Gauge turned "very bearish" on recently...
You've probably never heard of Aquestive Therapeutics (AQST).
But that's not important – because the Power Gauge has.
Each of these sliders is backed by data that can be further explored. And the data shows us that Aquestive is in a risky spot for investors right now.
That was the kind of setup I saw when I told Jon that Priceline looked like a no-go. The Power Gauge had provided me with the most important (and most relevant) information.
Again, Jon was excited about the stock. But he was a professional. And he was willing to reexamine his ideas.
The interview ended with Jon saying, "I'm going to take a harder look, since Marc Chaikin doesn't like it."
That was Monday, August 6, 2012. On Wednesday, the day after Priceline's earnings, the Halftime Report did a highly unusual follow-up.
The host started by asking Jon, "Chaikin spooked you a little bit?"
"He did indeed. And I think... a lot of folks followed Mr. Chaikin. Those of us that picked up some cheap out-of-the-money puts... well, they worked out like a charm.
"Those puts went from like $1.80 last night to $15, $16," Jon continued. "Again, great call by Marc Chaikin. And thanks, Marc, for helping me out."
In short, the Power Gauge was right. Priceline missed earnings. And Jon listened to me, made a bet against the stock, and racked up big profits instead of taking major losses.
Now, one great call is just that – a single great call.
But it was only possible because I had the Power Gauge at my side.
The Power Gauge uses the best data available to help individual investors make consistently great calls. And my goal is to share that power with as many investors as I can.
Good investing,
Marc Chaikin
Editor's note: Marc predicted the 2020 and 2022 bear markets just weeks before they struck. And now, he says we're fast approaching a "Bear Market Window" that could usher in the biggest potential losses in years.
That's why, on Wednesday, March 25, Marc is stepping forward to reveal exactly what's coming... and where you should move your money now to potentially lock in double-digit gains in 90 days. Click here to learn more.
